Santa Clara (CA) – A chip maker’s business model is relatively simple at its core: Sell more chips every year. Intel has now found a niche with its Atom processor, a niche that appears to be growing into a gigantic opportunity as time passes. But, Intel will have to move the processor downstream into the more generic application markets and broaden Atom’s availability to accommodate. As such, Intel is entering into an alliance with TSMC to achieve that goal and is now on a direct collision course with what will soon prove to be its bitter rival: ARM.
Frequent TG Daily readers may recall Rob Enderle’s recent article on the coming Intel vs. ARM battle, which was a nice heads-up on what we learned today.
Intel said that it has signed a memorandum of understanding (MOU) with contract chip manufacturer TSMC to work together on “technology platform, intellectual property (IP) infrastructure, and System-on-Chip (SoC) solutions.” The agreement focuses on Intel’s Atom processor, which will be ported to TSMC’s technology platform “including processes, IP, libraries, and design flows.”
As a result, Atom may become a much more flexible product that can be targeted at many more markets and not just netbooks, but industry and consumer electronics applications as well. TSMC, on the other hand, will get its hands on Intel technology that will allow the company to come up with custom Atom products and to serve those customers who want Intel-derived x86-based products, but were not able to get them from TSMC previously.
It was unclear which Atom products this MOU relates to, but since Intel kept mentioning “Atom SoC” and not just “Atom + SCH”, we assume that the alliance will take off with the introduction of the Moorestown Atom generation, a late 2009/early 2010 SoC that combines the chipset, graphics and the CPU on the same die.
The implications are rather dramatic if Intel’s strategy works out.
ARM has been a target for Intel since the introduction of Atom last year, long after releasing its previous ARM-related business, XScale, by selling all related assets and IP to Marvell for $600 million. [Marvell has recently created a 5 watt Linux server which is the size of a power plug, a derivative of that technology. -Editor]
While there have been signs that ARM may be trying to defend itself against Intel by moving upstream all the way into the netbook space, Intel is now moving downstream creating an overlapping battleground. Jack Gold, principal analyst at J.Gold Associates, believes that this fight “will be aggressive and potentially bloody”, but holds the potential of huge returns.
“Intel gets a vast new market potential for Atom since TSMC has connections to many consumer and lower end PC-type products, such as MIDs, webtop devices, netbooks and media servers/set-top boxes, especially in the important Far East markets in Taiwan and Japan,” Gold said. “TSMC gets to offer a high performance processor they did not have to design, but that they can customize for the clients who will take volume products. It also adds the ability to merge the work TSMC is doing on WiMax enabled devices and couple it with Atom processors.”
Gold added that custom designs is something Intel “does not generally do all that well, and is not set up to do efficiently”, but TSMC has experience in. “What Intel does get is a large potential for embedding chips in products they might not be able to reach, and generating revenues from the licensing fees,” he said. That means, of course, that Intel is adapting a similar business model that has made ARM so successful.
The scene is set and everyone appears to be at battle stations. Now we are waiting for the first shot, and it will be interesting to see which of the two will be more nimble and score the decisive strategic moves.